Zomato IPO can't be evaluated like old economy businesses, says ICICI Securities

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Zomato's Rs 9,375 crore IPO has opened for subscription. It is not just the first of the new business IPOs to hit the Indian bourses this month but also the first of many in the pipeline. With these new businesses, it is important to understand how to view them considering most of them are loss-making on the bottomline. Sudheer Guntupalli of ICICI Securities explained how the street looks at these listings.

Zomato's Rs 9,375 crore IPO has opened for subscription. It is not just the first of the new business IPOs to hit the Indian bourses this month but also the first of many in the pipeline. With these new businesses, it is important to understand how to view them considering most of them are loss-making on the bottomline. Sudheer Guntupalli of ICICI Securities explained how the street looks at these listings.
“You will have to view some of these new-age businesses through a different lens rather than the lens through which we are viewing some of the old economy businesses,” he said.
The street is not too concerned about these businesses not making profits at this juncture according to Guntupalli.
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"The key metric to note here is that you have to look at a company with healthy unit economics. The key here is identifying a company with promising unit economics,” he explained.
What is unit cost?
According to Investopedia, a unit cost is a total expenditure incurred by a company to produce, store, and sell one unit of a particular product or service.
“Unit economics is promising at today’s juncture but tomorrow – as in next year or next to next year – we would not want to call out the forward-looking estimates at this juncture,” Guntupalli shared.
For the full interview, watch the accompanying video.

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CompanyPriceChng%Chng
ICICI Bank676.65 20.70 3.16
ITC212.40 5.40 2.61
Wipro599.15 14.95 2.56
SBI Life Insura1,050.45 24.45 2.38
SBI428.90 6.85 1.62
CompanyPriceChng%Chng
ICICI Bank676.65 20.85 3.18
ITC212.35 5.30 2.56
SBI429.15 7.15 1.69
HCL Tech994.25 15.65 1.60
Axis Bank755.25 8.75 1.17

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